Tax Planning
Maximise Your Income: New Personal Income Tax Rate Cuts from July 2026
Australia is reducing its lowest personal income tax rate twice over the next two years—learn how this benefits you beginning 1 July 2026.
By NomadicTax Research Team • 5-8 min read • April 20, 2026
## What’s Changing
The Australian Government has legislated significant **personal income tax cuts** aimed at easing cost-of-living pressures. These changes include:
- From **1 July 2026**, the personal income tax rate for residents on **taxable income between AU$18,201 and AU$45,000** will be reduced from **16% to 15%**. ([alliedaccountants.com.au](https://alliedaccountants.com.au/australia-federal-budget-2025-26-tax-cuts-key-changes/?utm_source=openai))
- From **1 July 2027**, the same bracket rate will be further reduced from **15% to 14%**. ([mallesons.com](https://www.mallesons.com/au/en/insights/latest-thinking/publication/australian-federal-budget-march-2025-26?utm_source=openai))
These cuts are additional to earlier cuts rolled out starting in July 2024. ([ato.gov.au](https://www.ato.gov.au/api/public/content/0-307bd737-ce3a-4500-8a3d-77b5fd2a774a?utm_source=openai))
## Who Benefits Most
These changes are targeted at **low- and middle-income earners** but apply to **all resident taxpayers**. Here are some illustrative examples:
| Income level | Tax savings from July 1, 2026 | Additional savings from July 1, 2027 |
|--------------|-------------------------------|----------------------------------------|
| AU$30,000 | Approx AU$150/year | Further AU$30/year |
| AU$80,000 | Smaller absolute dollar change| Even smaller additional savings |
If your income falls in the lower bracket (AU$18,201–AU$45,000), you’ll see the **largest percentage gains**. Others will benefit proportionally less.
## Actionable Tips to Leverage the Cuts
- **Estimate your taxable income** for 2026–27 and beyond to see if aligning payments or deductions into those years helps.
- **Prepay deductible expenses**, such as work-related items or investment advice, late in the 2025–26 year may accelerate growth in your take-home pay.
- **Review your withholding rates** with your employer or PAYG instalments—changes may reduce over-withholding.
- **Watch for adjustments to Medicare levy thresholds**, which are being lifted in line with CPI as part of cost-of-living relief. If your income is near those thresholds, this could mean paying less levy. ([mallesons.com](https://www.mallesons.com/au/en/insights/latest-thinking/publication/australian-federal-budget-march-2025-26?utm_source=openai))
## Practical Example
**Sarah** earns AU$40,000 in taxable income. Under current settings (2025-26), the first AU$18,200 is tax-free, next portion taxed at **16%**. From **7/1/26**, Sarah’s portion between AU$18,201-AU$45,000 drops to **15%**, saving ~AU$150 per year. After **7/1/27**, it becomes **14%**, total annual saving ~AU$268 annually compared to 2024-25 settings. Supported by government data. ([mallesons.com](https://www.mallesons.com/au/en/insights/latest-thinking/publication/australian-federal-budget-march-2025-26?utm_source=openai))
These tax cuts are now law as part of the Treasury Laws Amendment (More Cost of Living Relief) Act 2025. ([au.andersen.com](https://au.andersen.com/wp-content/uploads/2025/04/AA_AU_AUSTRALIA_TAX_UPDATE_April-2025.pdf?utm_source=openai))